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Finance Minister Jim Flaherty quits cabinet

Finance Minister Jim Flaherty has resigned from cabinet, saying he wants to return to the private sector.

Finance Minister Jim Flaherty, who resigned from cabinet on Tuesday, has been a key member of Prime Minister Stephen Harper’s inner circle. His departure sets the stage for a cabinet shuffle as the prime minister looks to a successor to fill the influential post. (Justin Tang / THE CANADIAN PRESS)

OTTAWA—Toronto MP Joe Oliver will become Canada’s next finance minister, replacing Jim Flaherty who made the surprise announcement Tuesday that he was quitting his long tenure atop the economic portfolio.

Prime Minister Stephen Harper was expected to confirm Wednesday that Oliver — who is the natural resources minister — would be tapped to take over in finance.

It would be a dramatic promotion for the relative newcomer to politics. Oliver, who represents the Toronto riding of Eglinton—Lawrence, was elected in just 2011.

But Oliver, who holds a business degree from Harvard, boasts an impressive resumé in the financial sector that includes time as an investment banker at Merrill Lynch, executive director of the Ontario Securities Commission and president and CEO of the Investment Dealers Association of Canada.

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One Conservative strategist suggested Tuesday that Oliver, with experience in McGill law, Harvard MBA, securities regulation and Bay St. credentials, would be a solid pick.

“He really has the whole package,” the source told the Star. “His (appointment) will not scare the horses.”

As natural resources minister, he’s been in the spotlight as the government’s point man behind initiatives to build pipelines west across the Rockies and south into the United States to move oilsands crude oil out of Alberta.

But Harper now appears poised to give Oliver a new challenge as his finance minister, according to CBC and CTV, which both reported on his pending new cabinet assignment Tuesday night.

Flaherty, the outspoken MP from Whitby—Oshawa, leaves cabinet following eight years in the key economic portfolio.

He has been battling a skin ailment that affected his appearance and often left observers wondering if the demanding finance post was too much for him in his condition. But he said he is stepping down from finance for family reasons.

“This was a decision I made with my family earlier this year, as I will be returning to the private sector,” Flaherty said in a statement accompanying the blockbuster announcement released just after stock markets closed Tuesday.

He told Prime Minister Stephen Harper of his decision in a half-hour meeting on Monday afternoon, an aide said. Flaherty plans to stay on as an MP for now but will not run in the next election, the aide said.

Oliver takes over a key portfolio at a critical time, to oversee the 2015 budget that will take the Conservative government into that year’s federal election.

A right-wing stalwart who rose to prominence at Queen’s Park under former Ontario premier Mike Harris, Flaherty, 65, has been the point man in Harper’s effort to reshape the country’s economy in a more conservative mode.

Until Tuesday, Flaherty had insisted he would not step down until he had balanced Ottawa’s books, which saw a record $53-billion deficit in 2009. But his goal is in sight, with a $6 billion surplus predicted for 2015.

He will be remembered as the man in charge at finance during the withering 2008-09 recession.

“Since 2006, he has been a steady hand, ably guiding Canada through the most challenging economic times since the Great Depression and gaining the country a solid global reputation for economic management,” Harper said in a statement. He added that he accepted the resignation with “great reluctance.”

But opposition MPs stuck to their criticism of Flaherty’s approach, saying his unrelenting focus on budget-cutting is a mistake at a time when the economy is performing below capacity and unemployment, by Flaherty’s own admission, remains too high.

Over the course of 11 budgets, Flaherty brought in a baby bonus to replace a planned national daycare program set up by the previous Liberal government, handed more money to the provinces to end the so-called fiscal imbalance, reduced the GST, spent heavily to combat the recession in 2009 and 2010, shifted funds to the military, killed off the penny and cut billions of dollars in spending.

“I think it’s a loss for the Conservatives, because he has served them well, and has, for them, been a steadying influence throughout the most difficult downturn in our economy since the Depression,” NDP MP Peggy Nash said.

Flaherty stuck by Toronto Mayor Rob Ford last fall, as the mayor confronted questions about drug and alcohol use during his time in office. On Wednesday, Ford said he was sad to see Flaherty go.

“It’s very unfortunate for the whole country, Canada, to lose the best finance minister ever. It’s a sad day for me, losing a friend in politics . . . . He’s been a huge supporter of mine through thick and thin. He’s helped out the city more than any finance minister ever has,” Ford commented.

Although a pillar of Harper’s governing team, Flaherty was occasionally out of step with his boss, most recently when he touched off a brief political uproar over a key income-splitting tax break Harper promised voters in the 2011 election campaign.

He and Harper also seemed out of sync in 2012, when Flaherty announced the deficit would not be eliminated until 2016. This meant tax goodies that Harper promised in 2011, which were contingent on balancing Ottawa’s books, would not be fulfilled before an expected 2015 election. A few days later, Harper stepped in and said the books would actually be balanced a year earlier.

But an aide to Flaherty denied there had been any rift between the two Conservative stalwarts. “They’ve got a lot of respect for each other and they’ve worked closely together for years,” the aide said.

While Flaherty will go down as a fiscally able minister, he also leaves behind a controversial record: Some Canadians have yet to forgive him for suddenly killing income trusts on Halloween in 2006, a move that erased $20 billion from the stock market and went against an explicit Harper election promise. Asked recently if some still hate him for that, Flaherty quipped: “You’re right. I meet them in airports.”

His deep corporate income tax cuts remain a subject of heated debate. Flaherty has admitted that the corporate tax breaks didn’t result in as much pro-growth business investment as he had hoped.

Flaherty, who long ago raised eyebrows in Ontario by advocating a tax break for parents who send their kids to private school and proposing to forcibly remove the homeless from the streets, didn’t shy from hot political topics.

As federal finance minister, he angered mayors seeking more help from Ottawa by saying the federal government is “not in the pothole business.” He feuded regularly with former Ontario premier Dalton McGuinty, saying the provincial leader “likes to blame others for his problems” and once asserting Ontario’s taxes make it the “last place” in Canada where a new business would invest.

An activist minister, Flaherty repeatedly intervened in mortgage markets and challenged the banks over their promotion on insurance on their online banking websites. He also earned an admirable reputation in international financial circles and championed support in Canada for the disabled.

In his statement Tuesday, Flaherty said he was grateful to Harper for the chance to serve in the key economic portfolio.

“In my time as finance minister, I am proud of the work I have done to help manage the deepest economic challenge to face Canada since the Depression of the 1930s and ensure Canada emerged stronger and as a recognized economic leader on the international stage,” he said.

At Queen’s Park, Ontario Finance Minister Charles Sousa, whose government has sparred with Flaherty over Ottawa’s $641 million in reduced equalization payments to the province, was magnanimous.

“I have always respected Minister Flaherty’s leadership and stewardship of the economy,” he said. “I enjoyed working with him on many files, including the creation of a cooperative securities regulator,” Sousa said.

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